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IRB Infrastructure Developers Ltd
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Ladies and gentlemen, good evening, and welcome to the IRB Infrastructure Developers conference call hosted by the company for discussing the unaudited financial results for Q3 and 9 months FY '20.We have with us today on the call Mr. Virendra Mhaiskar; Mr. Sudhir Hoshing; Mr. Anil Yadav; Mr. Mehul Patel; and Ms. Poonam Nishal. [Operator Instructions] Please note that this conference is being recorded. I would now request Mr. Mhaiskar to give you an overview of the significant development during the quarter. Thank you, and over to you, sir.
Very good evening to all of you. I would like to welcome all the investors and analysts on this conference call. Hope you all have been able to go through the detailed numbers as well as the presentation by now. We have some key developments to share. So I will come to the results a little later. Firstly, would like to update you all on the GIC deal. We are now just days away from the closure of the same. We have received all the regulatory authority sign-offs, including lender NOCs, NHAI approvals and SEBI registration. Effectively, we are now looking at wrapping up the deal and receiving the funds within this month. The support extended in budget to sovereign wealth funds as well as for private InVT is a welcome move and will help us get the tax benefits without listing requirements. This deal also allows us to explore new opportunities together, and we are very much excited about the INR 63,000 crore worth of project lined up for bidding. We would like to maintain our preference on the order wins in the manner of BOT, TOT and HAM. Of this list, the first project we built was Mumbai-Pune TOT, where we have now emerged as a single bidder at a bid price of INR 8,262 crores to be paid in 4 installments spread over 3 years. It would comprise of a payment of INR 6,500 crores as the first installment in June '20, followed by 2 payments of INR 850 crores each in March '21 and '22 and a final payment of INR 62 crores in March '23. Now since it was a single bid, there is a process involved in avoiding the same. As per CVC guidelines, MSRDC can award a single valid bid in a second call after due process approvals. We believe the bid value being in line with MSRDC expectations, it should win their favor. If won, we will take the possession of the project and start tolling effective March 1, 2020. We had toll collections of approximately INR 918 crores in FY '19, as you all know, from this project. Additionally, the project will undergo a tariff revision of approx 18% from April 1, 2020. Hence, we should see collections of over INR 1,100 crores for FY '21. We are excited about the prospects of this project and look forward to closure of the award soon, which we can take up with a financial partner on the same 51-49 basis.Another extremely pleasing update is that we have now received the PCOD for our Goa-Karnataka project and have started tolling on the stretch from Feb 11, 2020. We had signed the LoA for this project just before the new Land Bill became effective, guide for land acquisition by NHAI. Hence, all the land acquired for this project underwent negotiations similar to the Yedeshi Aurangabad project, and a lot of time was spent on bridging payment gaps, revising paperwork as well as closing of the process of land acquisition on part of NHAI.All through, we worked closely with the communities and stakeholders to facilitate and conclude this process. We have now successfully completed and achieved PCOD for 75% plus project length. Most of the land for the balance work also has been handed over to us. And we expect to complete the remaining construction within next 2 -- 3 to 6 months. The project has been identified as a part of the prestigious economic corridor along the Mumbai-Cochin coastal connectivity in the Bharatmala Pariyojana. Effectively, whole of this 1,350 kilometer corridor is either already developed or is under various stages of development into a 4-lane highway, which would debottleneck the traffic movement between Bombay and Mangalore and will then auger for continued robust traffic growth.With the start of tolling on this project, all of our 12 BOT projects are now revenue-generating. We are also pleased to share that the initial collections are in line with our estimates.Coming to the Q3 of FY '20 results. It was a promising quarter, with strong momentum witnessed on toll as well as construction side of business. In particular, Ahmedabad-Baroda, Agra-Etawah and Hapur-Moradabad projects reported double-digit quarter-on-quarter growth. And the momentum stayed strong for the Kaithal-Rajasthan and Solapur Yedishi projects as well. For the whole portfolio, we saw a quarter-on-quarter revenue growth of 9% plus, excluding Mumbai-Pune which had nil contribution in quarter 3.Robust momentum on construction side continued, and we achieved 11% year-on-year growth for construction vertical with revenues of INR 1,390 crores. This was primarily contributed by 3 Rajasthan projects, Hapur-Moradabad, Agra-Etawah and the VK1 HAM project. The continuous robust growth for our construction vertical has been possible on the back of healthy order book and strong balance sheet, which ensured continuous flow of funds for this execution even in difficult financial scenarios.The industry is seeing a strong push coming back with around INR 63,000 crores bid pipeline to be awarded over the next quarter or so. The pipeline comprises of 2 BOTs, 2 TOTs, 53 HAM projects. Additionally, NHAI is working on another 14 BOT projects aggregating to over INR 22,000 crores, which are expected to be awarded over the following couple of quarters.Other than TOT, we are targeting to add BOT/HAM projects worth INR 7,000 crores to INR 8,000 crores to the list. Having strengthened our balance sheet further, with the GIC transaction likely to get concluded soon, we look forward to coming quarters to provide required ammunition for sustainable growth. And with the flexibility of sharing equity investment, our ability to absorb targeted wins becomes more plausible.With this, now I'll request Anil to take you through the financial analysis before addressing any queries in the subsequent Q&A session. Over to you, Anil.
Thank you, sir. I will present the financial analysis of Q3 of FY '20 versus Q3 of FY '19. Total consolidated income for Q3 of FY '20 is reduced to INR 1,790 crores from INR 1,835 crores, a decline of 2%. The consolidated toll revenue in Q3 of FY '20 has decreased to INR 353 crores from INR 533 crores, a decline of 34%. This is due to, in Q2 of FY '19, Mumbai-Pune project was operational; and during the Q3 of FY '20, same is not there.The consolidated construction revenue for Q3 FY '20 has increased to INR 1,407 crores from INR 1,276 crores in Q3 of FY '19, registering a growth of 10%. EBITDA has also marginally reduced from INR 807 crores to INR 761 crores, a decline of 6%. Interest cost has moved -- most of the project has become operational, interest is charged to the P&L, and that has led an increase in the interest expense to INR 410 crores in Q3 of FY '20 from INR 287 crores in Q2 of -- Q3 of FY '19. Depreciation has decreased to INR 95 crores in Q3 of FY '20 from INR 132 crores in Q3 of FY '19.PBT, excluding the -- PBT is INR 256 crores in Q3 of FY '20 from INR 388 crores, a decline of 34%. PAT is INR 160 crores in Q3 of FY '20 from INR 219 crores, a decline of 27%. Now I will request moderator to open the session for question and answer. Thank you.
[Operator Instructions] The first question is from the line of the Vibhor Singhal from PhillipCapital.
So a couple of questions from my side. One is on the toll collection growth. We have seen strong growth coming back in the Vadodara-Ahmedabad project, both on Q-on-Q as well as on Y-on-Y project [ basis ]. So could you just take us through exactly what is happening there? And are we seeing a bottoming out of traffic and all the problems that we had in terms of traffic diversion? Are they slowly getting resolved now?
The traffic diversion stays. But despite of the traffic diversion, this is the growth -- because see, the base diversion which took place has happened, but post that, the state has witnessed heavy economic activity. And as a result, the growth has been very strong as far as this particular project is concerned.
Okay. So that traffic diversion problem still remains?
Yes, yes.
Okay. And is it also possible that part of this traffic growth also came in because of FASTag implementation?
No, no. I think that, that would only increase the FASTag collection process, reducing the cash collection. But as I said, the traffic diversion, because of a competing road stay, overall economic activity has led to this strong revenue growth that the project has witnessed. And had the traffic diversion not been there, it would have been further strong.
Further strong, completely agree, sir. And on the flip side, sir, the 3 Rajasthan projects continue to reel -- I mean kind of bleed right now. I mean we've seen, again, a 13% kind of a Y-on-Y fall in toll collection on all the 3 projects put together. So any light on that, if you could just probably throw us?
Yes, I think there also, the projects continue to be under construction. And there is one more corridor in between where we are working, which is between Chittorgarh and Udaipur. Even there, there is a tremendous amount of bottlenecking if one has traveled to Udaipur -- I mean has landed at Udaipur airport and tried to go towards Udaipur, you would have certainly witnessed it. So even that corridor remaining under construction has had a tremendous impact on diversion of traffic. And I think it's a question of a few more months. And as we had witnessed in Kaithal-Rajastan, where once the construction got over, we saw a tremendous rebound, we are sure these projects also should witness the same kind of response.
Sure, sir. Sir, in terms of the EPC revenue -- EPC business, if I could just maybe delve on. I mean -- so I think as I see our order book right now that we have mentioned in the presentation right now is at around INR 6,800 crores. So is it that we have excluded the 2 Tamil Nadu HAM projects, which were probably facing land acquisition issues from the order book?
I think so. That's been done long back. Maybe Anil can confirm that.
Yes. We have removed Tamil Nadu from the order book.
Right. So right now, we just have 1 HAM project in our order book, right now?
Yes.
Sure, sir. So the order book of INR 6,800 crores at this point of time, does that basically limit our visibility or our growth ability for EPC business next year? Because even if, let's say, we win a BOT or a HAM project in this month or the next month itself, it will take at least 6 months for the AED, financial closure, all those things to take place. So maybe that project will come into execution only towards the second half of the next year, if at all. So does that probably lead us to some kind of a conservatism on our guidance for the FY '21 top line growth for the EPC business?
Partially right. It will all depend on the timing. We do have a very good visibility for the next 6 quarters at least. And even if some order flow comes in, say, next 2 quarters, and the next 2 quarters see the financial closure of the same, which would mean end of this year, you would have 6 months of overlap available, by which the new projects can certainly start contributing significantly and then arrest any kind of, if you see, revenue fall for FY '21, '21, yes.
Sure, sir. So just last question from my side. In terms of our bidding strategy, you mentioned that our order remains the same BOT, HAM and then EPC is what -- BOT and HAM is probably what you prefer in that sense. So in terms of HAM projects -- so in terms of the current bids that we have submitted, could you give us a number as to how much of bids have we already submitted in terms of the current pipeline?
As I said, the flow of preference remains BOT, TOT and HAM. As regards HAM is concerned, we have submitted around 3 or 4 bids, but there is a significant pipeline of almost 30, 40 projects, which are likely to happen before end of March itself. And certain select projects of those, we will certainly like to look at bidding. Over and above that, we have also received the pre-qualification status later on few of the BOTs which are coming up, and each of them is in the size of around INR 2,500 crores. So that also has come in. So we expect the bidding on those also to happen in the next 2 quarters. And these are, again, 4- to 6-lane projects, which would have a revenue visibility from day 1. So overall, I think the picture is now certainly felt to be improving significantly. And with that, I think in the next 2 quarters, we should be able to show a good amount of traction on order growth.
[Operator Instructions]
I believe there are no more questions. The presentation answers everything. So if there are no more questions, I'm very happy that my team has put up a very good presentation.
Sir, we have a few questions.
Okay. More than happy to answer that.
The next question is from the line of Teena Virmani from Kotak Securities.
Can you give the breakup of the order book in terms of the EPC work and the O&M portion?
Roughly INR 6,000 crores is -- close to INR 6,000 crores is the EPC order book and balance is O&M.
Okay. And regarding this Mumbai-Pune project, like you mentioned that there would be a tariff revision from April itself. So apart from the payment, which you have mentioned around INR 6,200 crores and -- INR 6,500 crores and then the remaining payments, will there be any other payment which would be required to be shared? There is no revenue share component in the same, right?
No, no. So there are 2 things. One is a fixed payment that is to be made to them.
Which is INR 6,500 crores?
Which is INR 6,500 crores, INR 850 crores, INR 850 crores and INR 62 crores in the fourth year. Now there is also a clause with regard to revenue share if the collection is more than what we have anticipated in our cash flows. So we have submitted a detailed cash flow. And if the revenues exceed those cash flows, then there is a revenue share of 90-10, which will go in favor of MSRDC.
90-10 in the sense, the incremental portion?
No, no, no. So see, the way it works is we are supposed to give a gross cash flow and estimated expense and a net flow. Now if the gross expected collection exceeds our own estimation, then for that exceeded revenue, we have to give 90% of that to MSRDC.
Okay, okay. 90% on the incremental portion.
Yes. But as regard as the revenue that we have ourselves estimated, there is no further revenue share to be given.
Okay, okay. But it would happen if -- for example, if the toll collections are much better, then on the incremental portion, 90% will go to MSRDC and 10% will be with you?
Yes.
And this project will be for a duration of 11 years?
10 years, 2 months.
10 years 2 months. So the kind of returns that IRB initially made when the project was initially awarded to the company, so obviously, now that things have also changed and the bidding criteria had also changed, the equity IRR would still be lower than what you were expecting, but it would still be better than the other projects that you currently have? Like can you give any kind of sense on the IRR that you are targeting to make? You have a fairly good...
At this point in time, when the bid is not even awarded, I can only very clearly say that it made a lot of commercial sense, we have bid on it, and all the detailing with regard to the returns and everything, we can discuss about that only and when we receive the letter of award. I can assure all my investors and stakeholders that it made a lot of commercial sense, only hence have we bid on it.
The next question is from the line of Vishwesh Mehta from Aditya Birla Mutual Fund.
Sir, just wanted to get an update on the Ahmedabad-Vadodara arbitration that was going on. Any progress there?
Yes. So the interim relief that was granted by the court further continues, because the presiding arbitrator is not yet appointed, even that is being decided by the court. And in that, the court has extended the interim relief saying that till such time that the arbitration process reaches Section 17 outcome, which is where the -- under Section 17, we will be asking the arbitration panel to look at continuing this interim relief. And so long as the arbitration panel doesn't decide this particular aspect of continuing the interim relief, the High Court has till such time already extended that relief. So the relief continues. So yes, so there is no bleed on the project for last 1 year now.
[Operator Instructions] The next question is from the line of the Vibhor Singhal from PhillipCapital.
Anil sir, can I just get this gross debt number at stand-alone and consolidated, please?
Gross debt is roughly INR 17,800-odd crores, and cash is roughly INR 2,000-odd crores. And net debt is INR 15,000-odd crores. And on a stand-alone business, it's roughly INR 3,800 crores.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you so much, everybody, for joining this call and look forward to see you all on the call in the next quarter as well. Thank you, and have a great evening.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbytes conferencing services. You may please disconnect your lines now. Thank you.